Settling Loan Debt With Lender

If a lender has a judgment against you, you can try to settle that debt before the lender garnishes wages or finds and gets your assets.

Q: My sister and I purchased a boat slip several years ago, which we could not afford to keep. Our lender has just filed judgment papers. We are at a decision making point now in deciding whether to negotiate a lower amount with the lender or simply let them try to collect on the judgment.

We understand they have 20 years to try to collect. My sister is head of household, so according to Florida Statutes, they can’t garnish her wages or take money from her bank accts or touch her retirement accounts. Both of us are living paycheck to paycheck. Just wondering if you have any words of advice?

If we decide not to settle with the lender, is there anything we can do to protect ourselves? Can we transfer the title into an LLC? Can they put a lien on my sister’s house? We also have the issue of the homeowner’s association fees. We are current on those fees, however, we don’t want to continue paying them for the next 20 years. Do you have any advice for us?

A: Let’s start with your issue relating to paying the homeowner’s association. If you buy a property and it is part of an association, the association generally has certain responsibilities and duties with respect to the property as a whole.

The association may manage the property, hire people to maintain the grounds, keep the books, obtain casualty and liability insurance and act as the manager for the property. All of these activities cost money and the members of that association bear the responsibility to pay for these services and expenses.

If what you are saying is that you don’t want to pay fees to the association, we’d suggest you sell the property that is part of the association and move elsewhere where you won’t have these expenses to an association. But wherever you end up, you’ll probably end up having to pay fees of one sort or another for these services whether by paying real estate taxes or other service and user fees.

As far as your question relating to the boat slip. It seems you want to keep the boat slip but not pay the lender what it is owed. If that’s the case, it would seem logical for you to sell the boat slip to pay off part of the debt owed to the bank. If you have sold the boat slip and used the money to pay down your debt with the lender, you might be asking how you should proceed now with the lender.

It seems to us that you are trying to avoid paying the lender even if you have the means to pay them. And to us, that seems wrong. However, if you have fallen on hard times, it’s true that the lender can sue you. If the lender obtains a judgment against you for the money you owe, the lender can try to use that judgment to get what it is owed. Your question as to how you can avoid paying the lender seems misguided at best.

You should know that if you transfer assets to avoid paying a debt, the creditor could try to file another suit against you for the fraudulent conveyance of property under state laws.

If you are working to settle this matter with the lender and you don’t have much in terms of assets, these days many lenders will take what they can get now rather than spend good money trying to go after someone with little change of getting something back in return.

Finally, if the lender is aggressive and decides to pursue its claims against both of you, the lender can use a judgment it has received to collect on assets either of you own, including your homes. There are certain laws that protect some classes of assets such as retirement accounts, but a judgment creditor can attempt to go after any other assets a debtor owes subject to any limitations that may exists under your state’s laws.

Definitioner

Real Estate is land and anything permanently attached to it, such as buildings and improvements.

Point

A Point is one percent of a loan amount.

Lien

A Lien is an encumbrance against the property, which may be voluntary or involuntary. There are many different kinds of liens, including a tax lien (for unpaid federal, state, or real estate taxes), a judgment lien (for monetary judgments by a court of law), a mortgage lien (when you take out a mortgage), and a mechanic's lien (for work done by a contractor on the property that has not been paid for). For a lien to be attached to the property's title, it must usually be filed or recorded with a local county government office.

Lender

A Lender is a person, company, corporation, or entity that lends money for the purchase of real estate.